Report on remuneration policy and compensation paid

On 29 March 2022, the Board of Directors of Iren S.p.A., upon the proposal of the Company's Remuneration and Appointments Committee, approved the Guidelines on the Remuneration Policy for Directors, including executive/with special offices, and Statutory Auditors of Iren as well as top management/Senior Executives with Strategic Responsibilities of the IREN Group for 2022 (hereinafter "2022 Guidelines"), consistent with the recommendations of the current Corporate Governance Code.

 

The Shareholders' Meeting of Iren S.p.A. of 21 June 2022 has:

  • approved Section One of the Report on Remuneration Policy 2022, referring to the Company's policies on the remuneration of the members of the administrative bodies, of the control body (without prejudice to the provisions of Article 2402 of the Italian Civil Code), and of the Executives with Strategic Responsibilities for the financial year 2022 and the procedures used for the adoption and implementation of such policy
  • cast an advisory vote on Section Two of the Report itself with reference to the remuneration paid in the financial year 2021.

 

Objectives and general principles of the Remuneration Policy

Remuneration policies, defined in compliance with the Company’s governance model, as well as with the recommendations contained in article 5 of the Corporate Governance Code, pursue the general goal of attracting, retaining and motivating individuals useful for the development of the Group, recognising the responsibilities assigned to them, and guiding their actions towards the achievement of company objectives, rewarding the results obtained.

 

More specifically, these policies contribute to aligning the interests of management with the - priority - objective of ensuring the sustainable success of the Company, by increasing value for Shareholders in the medium/long term, taking into account the interests of stakeholders, and make it possible to achieve sustainable and stable results in the short and long term in line with the Business Plan, in which the ESG (Environment, Social and Governance) aspects are integrated, to implement adequate retention of strategic positions for governance and business and, in general, to pursue the vision, mission and corporate values.

 

Furthermore, the long-term interests of the Company and the Group's risk management policy are an integral part of the Group's internal control and risk management system (which is illustrated in the Report on Corporate Governance and Ownership Structures pursuant to article 123-bis Consolidated Law on Finance), in accordance with which the Remuneration Policy was prepared. In order to monitor these aspects, the choice has been made to hold a joint meeting between the Remuneration and Appointments Committee and the Control, Risk and Sustainability Committee of IREN S.p.A. for 2022 to examine, in compliance with the functions and prerogatives of their respective competences, the 2022 Guidelines, prior to the resolutions for which the Company's administrative body is responsible.

 

In terms of remuneration policies, the short-term incentive system for the IREN Chief Executive Officer and General Manager, the IREN Group Senior Executives with Strategic Responsibilities, as well as for additional resources who can contribute significantly to the achievement of the Group's budget objectives, represents a tool intended to differentiate excellent performance without any form of automatic recognition and not linked to the achievement of assigned objectives and, in each case, pursues the goal of:

  • allowing performance to be assessed on quantitative and qualitative variables with a direct link to the Company's performance, as well as to its strategic objectives and sustainable success, in line with the Company's risk management policy;
  • guaranteeing that the variable component, with respect to the fixed component, creates an incentive and is significant;
  • avoiding the creation of excessively complex mechanisms, difficult to communicate and manage;
  • selectively guiding individual performance, while also guaranteeing the achievement of Group and company goals.

 

The long-term variable remuneration component - confirmed for the entire duration of the Business Plan, as a sequential succession of closed, monetary plans, subject to Regulations to be reviewed at the beginning of each three-year period, for Directors holding special offices within IREN - without prejudice to what will be specified below -, for IREN Group Senior Executives with Strategic Responsibilities, as well as for other resources that can make a significant contribution to achieving the objectives of the Group's 2030 Business Plan, pursues the objective of:

  • stimulating the ability to create value for the Group, rewarding the achievement of industrial, strategic and business objectives;
  • guaranteeing the achievement of economic-financial and ESG objectives in the context of medium/long-term sustainability;
  • strengthening the motivation of the relative beneficiaries in pursuing the strategic objectives set out in the Business Plan, aligning their interests with those of stakeholders (Shareholders, customers, employees, etc.);
  • attracting and motivating employees, rewarding the achievement of results and a culture of performance, as well as virtuous behaviours implemented to achieve the same;
  • developing and strengthening retention policies for key company resources, making it possible to increase their sense of belonging and create incentives for them to remain with the IREN Group;
  • ensuring that the pay-mix (relative weights of fixed remuneration, short-term and long-term variable remuneration) is in line with market practices, without prejudice to the principle of sobriety which characterises the Company.

 

With regard to the non-executive Directors and the members of the Board of Statutory Auditors, the objective of the policies is to make available to the Shareholders all the elements that enable them to adopt the measures that pertain to them, by defining, in the appropriate venues, remuneration that is appropriate to the competence, professionalism and commitment required by the tasks assigned to them, as well as to the size and sector characteristics of the Company and its situation.

 

The process of developing the 2022 Guidelines also took into account:

  • resolutions made on the issue of compensation by the Directors, adopted by the Shareholders' Meeting on 22 May 2019, in particular the principles of the comprehensive nature of remuneration and the obligation to pay back employees and of amounts established as compensation for Directors with special offices within IREN (see that detailed herein);
  • the indications expressed by public Shareholders regarding the positions appointed by them pursuant to current Shareholders’ agreements;
  • the overall significance of positions and roles examined;
  • the results of the remuneration benchmarking carried out in 2021 by the Remuneration and Appointments Committee, with reference to the remuneration of the non-executive Directors and the members of the internal committees (with the support of the advisor The European House - Ambrosetti);
  • the expiry of the term of office of IREN's Board of Directors with the approval of the financial statements as at 31 December 2021.

 

Requests from the market and institutional investors relative to top management remuneration policies were taken into account, as well as best practices on the market, through:

  • in-depth analysis of the outcome of the Shareholders' Meeting vote on the Report on the 2021 Remuneration Policy and on the compensation paid for 2020 submitted to the Shareholders' Meeting held on 6 May 2021;
  • an examination of the issues of attention raised by the Chairperson of the Corporate Governance Committee in the letter sent in December 2021 to the competent bodies of Italian listed companies, a letter which, once again, with reference to remuneration policies, invited issuers to (i) improve said policies by defining clear and measurable rules for the payment of the variable component and any end-of-office indemnity (ii) adequately consider the consistency of the parameters identified for the variable remuneration with the strategic objectives of the business activity and the pursuit of sustainable success, assessing, if necessary, the provision of non-financial parameters, which are always predetermined and measurable;
  • an in-depth study of this as part of the annual self-assessment activity of the Board of Directors and its Committees.

 

Also for 2022, the Principles adopted by the Shareholders' Meeting of 22 May 2019, already in force in the previous Board term and inspired by a logic of compensation containment, were taken into account:

  • principle of the all-inclusive nature of the remuneration received for the employment relationship and obligation to repay it, which applies to all managers/employees of Group companies, on the basis of which all corporate positions held within Group companies/entities must be held without any additional remuneration, since they are part of the duties[1];
  • the principle of the use of the Directors of the parent company IREN’s Board of Directors and employees prevailing in the administrative bodies of the companies directly and indirectly controlled by IREN.

 

The same Shareholders' Meeting also established the maximum ceiling for overall compensation paid to Directors with special offices, pursuant to the Articles of Association for the three year period 2019-2021 (Chairperson, Deputy Chairperson and the Chief Executive Officer, taking into account the above principles). These limits are outlined in the respective sections and guided the preparation of the Remuneration Policy since the establishment of the body.

 

The criteria summarised above, as well as the principles adopted by the Shareholders' Meeting were applied, to the extent compatible, also when the delegated bodies determined the remuneration for IREN Group Senior Executives with Strategic Responsibilities, as established in the Corporate Governance Code (see the dedicated section herein).

 

[1] The IREN Chief Executive Officer and General Manager is the exception, limited solely to the fixed compensation component, pursuant to article 2389, paragraph 3, Italian Civil Code, due for the exercising of his powers as the Company's Chief Executive Officer. 

Correlation between strategy, sustainability, and remuneration policies

The growth strategy of the new Business Plan launched by IREN in 2021 is consistent with the main trends already identified in previous business plans and confirmed in the current one, with the aim of becoming a leading operator in sustainability with a particular focus, with medium and long-term objectives, on the areas of decarbonisation, circular economy, water resources, resilient cities and people.

 

In this context, IREN's remuneration policy is a fundamentally important element in ensuring the pursuit of the strategic objectives of business sustainability and guarantee an increase in Shareholder value in the medium to long term, in line with the 2030 Business Plan.

Report on remuneration policy 2022 and compensation paid 2021

Report on remuneration policy 2022 and compensation paid 2021

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Executive summary

 

Fixed remuneration

Purpose and characteristics

Reflect the technical, professional and managerial skills and complexities and responsibilities of the role

 

Criteria and parameters

Definition of the remuneration positioning assesses both the evolution of the organisation and market benchmarks carried out

 

Recipients/Gross annual amounts

IREN Chief Executive Officer/General Manager

457,000 Euro, of which:

•       400,000 Euro Gross Annual Remuneration (of which 50,000 Euro related to the assignment)

•       57,000 Euro for the position of Chief Executive Officer

 

IREN Group Senior Executives with Strategic Responsibilities

Salary determined based on the complexity and responsibilities of the role performed and the skills required, to be gradually aligned to market median 

2022 Short-Term Incentive Plan

Purpose and characteristics

  • Recognise and reward the achievement of annual objectives assigned
  • Focus performance on achieving company objectives

(Plan subject to malus and clawback clauses)

 

Criteria and parameters

Gate: maintain Investment Grade status

 

2022 Objectives

IREN Chief Executive Officer/General Manager

1. Group net investments (weight: 20%)

2. Group IFN/EBITDA (weight: 20%)

3. Group strategic projects (weight: 30%)

4. Relationship with stakeholders, sustainability, environmental issues, governance (ESG) (weight: 30%)

 

IREN Group Senior Executives with Strategic Responsibilities

1. Economic-financial objectives (weight: 40%)

2. Group strategic projects or connected to individual Business Units (weight: 30%)

3. Relationship with stakeholders, sustainability, environmental issues, governance (ESG) (weight: 30%)

 

Assessment of Objectives

  • Average achievement threshold for objectives: ≥ 70% of the individual form
  • Minimum threshold for individual objective: 60% (target=100%)
  • Group corrective factor: multiplier/demultiplier of individual results

 

Recipients/Gross annual amounts

IREN Chief Executive Officer/General Manager

35% of the Gross Annual Remuneration (target value)

IREN Group Senior Executives with Strategic Responsibilities

36.2% of the Gross Annual Remuneration (average target value)

2022-2024 Long Term Incentive Plan

Purpose and characteristics: 

Promote the creation of Shareholder value, with a view to long-term sustainability

(Plan subject to malus and clawback clauses)

 

Criteria and parameters: 

Gate: maintain Investment Grade status

Objectives

1. Cumulative EBITDA 2022-2024 (weight: 35%)

2. Cumulative Operating Cash Flow Levered 2022-2024 (weight: 20%)

3. Cumulative Investments 2022-2024 (weight: 20%)

4. Sustainability/ESG Objectives (weight: 25%)

 

Assessment of Objectives

  • Minimum threshold for each objective i) economic-financial: 90% (defined target) ii) sustainability/ESG: 70% (defined target)
  • Closed plan with three year vesting and 6 months deferral payment

 

Recipients/Gross annual amounts

Chairperson/Chief Executive Officer/Deputy Chairperson of IREN

Target bonus to be defined after the Meeting

 

General Manager of IREN

100% of Gross Annual Remuneration (target value and maximum over the three-year period)

 

IREN Group Senior Executives with Strategic Responsibilities

100% of Gross Annual Remuneration (target value and maximum over the three-year period)

Non-monetary benefits

Purpose and characteristics: 

Promote the retention of management resources

 

Criteria and parameters: 

Benefits mainly of an insurance and social security nature, defined through the national collective labour contract and reference company policies

 

Recipients/Gross annual amounts: 

Social security plans; Insurance and healthcare plans; Company car; Housing.

Compensation at end of term and/or relationship

Purpose and characteristics: 

Protect the interests of the Company

 

Criteria and parameters: 

Indemnity in cases of non-renewal/revocation without just cause prior to the end of the Director’s terms and/or other duties

 

Recipients/Gross annual amounts: 

IREN Chief Executive Officer/General Manager:

Specific discipline, with measures to protect the Company, in case of revocation without just cause, prior to expiry of the proxies

No agreements pursuant to article 2125 of the Italian Civil Code signed.